Is the Financial Industry עוסק ביישובו של עולם?

Nobel (Memorial Prize) laureate and (liberal) New York Times columnist Paul Krugman argues that the financial markets, in their current size, are bad for the broader economy:

More than that, reform actually should hurt the bankers. A growing body of analysis suggests that an oversized financial industry is hurting the broader economy. Shrinking that oversized industry won’t make Wall Street happy, but what’s bad for Wall Street would be good for America. …

What’s the matter with finance? Start with the fact that the modern financial industry generates huge profits and paychecks, yet delivers few tangible benefits.

Remember the 1987 movie “Wall Street,” in which Gordon Gekko declared: Greed is good? By today’s standards, Gekko was a piker. In the years leading up to the 2008 crisis, the financial industry accounted for a third of total domestic profits — about twice its share two decades earlier.

These profits were justified, we were told, because the industry was doing great things for the economy. It was channeling capital to productive uses; it was spreading risk; it was enhancing financial stability. None of those were true. Capital was channeled not to job-creating innovators, but into an unsustainable housing bubble; risk was concentrated, not spread; and when the housing bubble burst, the supposedly stable financial system imploded, with the worst global slump since the Great Depression as collateral damage. …

And what about the much-touted benefits of financial innovation? I’m with the economists Andrei Shleifer and Robert Vishny, who argue in a recent paper that a lot of that innovation was about creating the illusion of safety, providing investors with “false substitutes” for old-fashioned assets like bank deposits. Eventually the illusion failed — and the result was a disastrous financial crisis. …

But the fact is that we’ve been devoting far too large a share of our wealth, far too much of the nation’s talent, to the business of devising and peddling complex financial schemes — schemes that have a tendency to blow up the economy. Ending this state of affairs will hurt the financial industry. So?

While I generally detest Krugman’s columns, for although by all accounts his academic economic work is first-rate, his political screeds are disingenuous, hyper-partisan, and just nasty, his basic point in this column is at the core of an old discussion between me and my colleagues about the application of the Halachic status of משחק בקוביא, who is invalid as a witness, to at least certain types of speculators in the financial markets. The Mishneh states:

ואלו הן הפסולין המשחק בקובי’1

and the Gemara explains:

משחק בקוביא מאי קא עביד אמר רמי בר חמא משום דהוה אסמכתא ואסמכתא לא קניא רב ששת אמר כל כי האי גוונא לאו אסמכתא היא אלא לפי שאין עסוקין ביישובו של עולם מאי בינייהו איכא בינייהו דגמר אומנותא אחריתי <ותנן> [דתנן] א”ר יהודה אימתי בזמן שאין להן אומנות אלא הוא אבל יש להן אומנות שלא הוא <הרי זה> כשרים אלמא טעמא דמתניתין משום יישובו של עולם הוא קשיא לרמי בר חמא וכי תימא פליגי רבנן עליה דר’ יהודה והא”ר יהושע בן לוי כל מקום שא”ר יהודה אימתי ובמה אינו אלא לפרש דברי חכמים רבי יוחנן אמר אימתי לפרש ובמה לחלוק ודכולי עלמא אימתי לפרש הוא גברא אגברא קא רמית מר סבר פליגי ומר סבר לא פליגי ולא פליגי והתניא בין שיש לו אומנות שלא הוא בין שאין לו אומנות אלא הוא הרי זה פסול ההיא רבי יהודה משום רבי טרפון היא דתניא רבי יהודה אומר משום רבי טרפון לעולם אין אחד מהן נזיר לפי שלא נתנה נזירות אלא להפלאה:2

We are concerned here with the problem of אין עסוקין ביישובו של עולם. Now, financial speculation is often called gambling, but the argument in favor of the legitimacy of such speculation has always been that robust financial markets are beneficial to the economy. But if Krugman and the analysts he supports are correct, than a great deal of current financial activity is actually hurting, rather than helping, the economy!

Now obviously, this is not the last word on the subject, and even if it were to be conclusively demonstrated that the financial industry is definitely too big for the good of the broader economy, that still would not necessarily mean that any specific trader, or even class of traders, could be considered non-productive. We merely wish to note that it is not necessarily quite that simple to distinguish between “bad” gambling, and “good” financial speculation.

  1. סנהדרין כד: – קשר []
  2. סנהדרין כד: – כה. – קשר []

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